Chapters 6, 8, and 9

The direct labor hours required to satisfy the production budget is shown on the _________________ _________________ budget.

direct labor

To calculate raw materials to be purchased on the direct materials budget, add the desired ______________ inventory of raw materials to the new raw materials needed based on the __________________ budget and _________________ the beginning inventory of raw materials to arrive at raw materials to be purchased.

ending; production; deduct

Revenues and costs are adjusted as the level of activity changes on a _________________ budget.

flexible

All costs of production other than direct materials and direct labor are shown on the _________________ ___________________ budget.

manufacturing overhead

Both the production and selling and administrative expense budgets are prepared using information directly from the _________________ budget.

sales

A manager who wants to submit a budget that is easy to attain will try to put budgetary ________________ into his or her budget.

slack

The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a ___________________ variance.

spending

An unchanged planning budget is known as a(n) ________________ planning budget.

static

When computing a segment margin, only __________________ fixed costs are charged to the particular segment.

traceable

If the actual cost is greater than what the cost should have been, the variance is labeled as ____________________.

unfavorable

Companies use the ________________ ______________ cycle to evaluate and improve performance.

variance analysis

Match the definition with the term. 1. Unfavorable variance 2. Favorable variance A. Actual revenue is less than budgeted revenue. B. Actual revenue is more than budgeted revenue

1. A 2. B

Contrast the way fixed manufacturing overhead costs are treated in absorption costing versus variable costing. 1. Absorption Costing 2. Variable Costing A. fixed manufacturing overhead is treated as part of the per unit product cost and expensed as units are sold B. fixed manufacturing overhead is treated as a period cost and expensed in full each period

1. A. 2. B.

Match the following terms with the description: 1. Static planning budget 2. Flexible budget A. Takes into account changes in level of activity B. Only considers the planned level of activity

1. B 2. A.

Place the following line items in order to construct a contribution format income statement. A. Net Operating Income B. Sales C. Contribution margin D. Variable costs E. Fixed costs

1. B 2. D 3. C 4. E 5. A

A spending variance is the: A. difference between what a cost should have been at the actual level of activity and the actual amount of the cost B. difference between the budgeted cost of the item and the actual cost of the item C. projected amount to be spent D. actual amount spent

A

In a manufacturing company, which budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories? A. Direct materials budget B. Sales budget C. Production budget D. Merchandise purchases budget

A

The difference between a revenue or cost item in the static planning budget and the same item in the flexible budget at the actual level of activity is a(n) _______________ variance. A. activity B. revenue C. spending

A

Variances are more accurate when using: A. multiple cost drivers B. a single cost driver

A

When constructing segmented reports: A. some costs are not traceable to particular segments B. allocating common costs to segments improves segment analysis C. all costs should be allocated to the various segments

A

Which of the following is not found in the financing section of the cash budget? A. Cash deficiency B. Interest C. Repayments D. Borrowings

A

Identify some of the characteristics of the master budget schedules: A. Answers several key questions for a company. B. Based on estimates and assumptions. C. May be prepared in any order.

A and B

Under absorption costing product costs consists of: A. both variable and fixed manufacturing costs B. only variable manufacturing costs C. all manufacturing and selling and administrative costs D. only fixed manufacturing costs

A.

Budgeted expenses for areas other than manufacturing are shown on the __________________ budget. A. manufacturing overhead B. selling and administrative C. ending finished goods inventory D. cash

B

Performance reports for cost centers: A. are significantly different than reports prepared for other departments B. do not include revenues or net income C. are not common in most organizations

B

The concept that focuses on important variances and ignores trivial ones is: A. static budgeting B. management by exception C. the variance analysis cycle D. flexible budgeting

B

The idea that a manager should be help accountable for only the items the manager can actually control is the basis of: A. budgetary slack B. responsibility accounting C. self-imposed budgeting D. budgeting

B

The purpose of a(n) _________________ is to assist in establishing goals and measuring operating results. A. income statement B. balance sheet C. budget

C

To calculate the direct labor requirement for each quarter: A. add the number of direct labor hours required per unit to the number of units to be sold B. add the number of direct labor hours required per unit to the number of units to be produced. C. multiply the number of direct labor hours required per unit times the number of units to be produced D. multiply the number of direct labor hours required per unit times the number of units to be sold

C

Unfavorable activity variances may not indicate bad performance because: A. increased activity should result in higher fixed costs. B. costs should not change as activity changes C. increased activity should result in higher variable costs.

C

When using variable costing, fixed manufacturing overhead is: A. never expensed B. assigned to units of the product and expensed as the units are sold C. expensed in the period incurred

C

Which of the following holds managers accountable for revenues and costs? A. Budgeting B. Budget committee C. Responsibility accounting D. Self-imposed budget

C

You would expect total _______________ costs to be higher in the flexible budget if the activity level for a period is higher than expected. A. fixed B. fixed and variable C. variable`

C

Which of the following budgets are needed to calculate unit product costs? A. Cash budget B. Selling and administrative budget C. Manufacturing overhead budget D. Direct labor budget E. Direct materials budget

C, D, and E

Gathering feedback to ensure that the plan is being followed is referred to as ___________________.

Control

The ending finished goods inventory budget computes the: A. cost of sold units B. number of sold units C. number of unsold units D. cost of unsold units

D

The receipts, disbursements, excess or deficiency, and financing section are all parts of the: A. production budget B. sales budget C. selling and administrative expense budget D. cash budget

D

Which of the following is related to submitting a budget that is too easy to attain? A. Responsibility accounting B. Master budget C. Budget target D. Budgetary slack

D

An essential management tool that communicates management's plans throughout the organization, allocates resources and coordinates activities is the ______________________ __________________.

Master budget

Bart's Inc. operates retail stores in various cities. Each store sells various products. Segmented income statements are prepared for each store. Within each store, segmented income statements are further broken down by product line. The property tax for the store will be a(n) _______________ fixed cost for the store, and a(n) _______________ fixed cost for each product line sold in the store.

Traceable; Common

Developing goals and preparing various budgets to achieve those goals is part of the _________________ process.

planning

Match the following results with the discrepancies due to 4000 units of actual activity versus the 2500 planned units. 1. Unfavorable wages 2. Favorable revenue 3. Unfavorable utilities 4. No change A. Mortgage payment for plant B. Plant was in operation for an extra shift each week for increased production C. Increase in employee hours to manufacture additional units D. More units were sold than expected

1. C 2. D 3. B 4. A

When the planned level of activity is 900 unis and the actual level of activity is 1000 units, the total variable cost for supplies on the flexible budget: A. should be higher than on the planning budget B. should be lower than on the planning budget C. could be higher or lower than the actual cost of supplies

A and C

Which of the following approaches may be used internally by manufacturing companies for costing products for the purposes of valuing inventory and cost of goods sold? A. Absorption costing B. Fixed costing C. Variable costing D. Statement costing

A and C

Which of the following budgets are directly based on information from the sales budget? A. Production budget B. Direct labor budget C. Direct materials budget D. Selling and administrative expense budget

A and D

What is listed in the receipts section of the cash budget? A. Total credit sales B. All cash inflows, except from financing C. Total sales for the period D. All cash inflows

B

What is multiplied by the budgeted unit sales to obtain total sales on the sales budget? A. Number of units B. Sales price per unit C. Budgeted unit sales

B

When the activity level increases by 15%, net operating income in the flexible budget will increase by: A. exactly 15% B. more than 15% C. less than 15%

B

Which budget is a detailed schedule showing the expected sales for the budget period? A. Production budget B. Sales budget C. Direct materials budget D. Cash budget

B

Which of the following is an advantage of budgeting? A. Budgets primarily help managers with day-to-day emergencies. B. Budgets communicate management's plan throughout the organization C. Budgets focus on what has happened in the past.

B

Which of the following statements is correct regarding the usefulness of the segmented income statement for segment reporting? A. Segmented income statements are less detailed, thus more useful to management than absorption costing income statements. B. Segmented income statements can be broken down by department and further broken down by product lines within each department. C. Segmented income statements allocate common fixed costs among the various segments in order to ensure that these costs are covered.

B

Which of the following statements is true? A. A cost is fixed if it proportional to activity. B. Fixed costs are often more controllable than variance costs. C. It is easier to significantly reduce variable costs than to reduce fixed costs.

B

The flexible budget performance report consists of: A. the manager's performance evaluations. B. the planning budget, flexible budget and actual results. C. revenue and spending variances. D. activity variances.

B, C, and D

What is added to the variable selling and administrative expenses to get the total selling and administrative expenses? A. Direct materials B. Non-cash selling and administrative expenses C. Merchandise purchases D. Fixed selling and administrative expenses

D

A quantitative plan for acquiring and using resources over a specified time period is a(n) _____________________.

budget

Collections on credit sales made to customers in prior periods plus collections on sales made in the current budget period equals expected _____________ collections.

cash

The section on the cash budget that summarizes all cash payments that are planned for the budget period is the cash _________________ section.

disbursements

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted __________________ __________________.

income statement

A number of separate, but independent, budgets that formally lay out the company's sales, production, and financial goals is the definition of the ___________________ budget.

master

In a manufacturing company, the _________________ budget is completed right after the sales budget because the sales budget helps to determine how many units need to be made.

production

In a manufacturing company, the _________________ budget shows the number of units that must be produced to satisfy sales needs and to provide for the desired ending inventory.

production

The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) __________________ variance.

revenue